OPEC data show a cut is necessary to meet Algerian proposal

Data show total production from the 14 member states is above the high end of a proposed ceiling.
By Daniel J. Graeber  |  Oct. 12, 2016 at 9:16 AM
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VIENNA, Oct. 12 (UPI) -- A production cut from members of the Organization of Petroleum Exporting Countries would be needed to meet an Algerian proposal, OPEC's monthly report found.

OPEC said in its monthly market report for September that, according to secondary sources, total production from all member states averaged 33.39 million barrels per day. That's an increase of 220,000 bpd from the previous month.

Lower crude oil prices, relative to 2014, are crimping the budgets for some OPEC member states that rely on export for revenue. Outside of OPEC, the strains on the sector have spilled over into labor figures for other major producers like Norway and the United States.

Meeting last month in Algeria, OPEC members agreed to consider a freeze in production to help erase the wide gap between crude oil supplies and demand. In a statement on the proposal, OPEC said its 14 members would work toward a production target of between 32.5 million and 33 million bpd.

That means OPEC, assuming the secondary sources are accurate, would need to cut production by at least 1 percent to satisfy the terms of the proposal from Algeria using September's figures. Before last month's meeting, Venezuelan Oil Minister Eulogio Del Pino told the state oil company known as PDVSA that global crude oil production would need to drop by about 10 percent, or 9 million barrels per day, in order to keep pace with current demand.

In its monthly market report, OPEC said expected total world oil demand for 2016 was revised upward from its previous report by 10,000 bpd to 1.24 million bpd. Next year, world oil demand is expected to increase by 1.15 million bpd, a level unchanged from OPEC's previous report.

Meanwhile, production outside of OEPC is expected to increase slightly next year, with new projects in Russia contributing to most of the growth. Some OPEC members have stated the contribution from non-member states was important for the success of the Algerian accord and Russia has so far offered mixed signals about its role in the proposal.

Kremlin officials earlier this year said it considered oil priced at around $50 per barrel to be normal. Brent crude oil traded at around $52.60 per barrel early Wednesday.

In a Sept. 5 statement with his Saudi counterpart, Russian Oil Minister Alexander Novak said that the onus was on them, as two countries that combine to meet about 20 percent of the global demand for crude oil, to coordinate on ways to address widespread volatility in oil prices.

According to secondary sources, Saudi oil production declined about 0.8 percent from August. Based on direct communication with OPEC, the country's crude oil production increased by about 0.2 percent.

Four member states -- Gabon, Indonesia, Iran and Libya -- did not report production levels directly to OPEC in September.

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